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Varchild2008 (85.34)

Varchild lowers Strong Buy rating for AAI to Buy



June 10, 2009 – Comments (2) | RELATED TICKERS: OIL , GAS.DL2 , AAI.DL2

Due to OIL prices spiking... I am reducing my Strong Buy rating for AAI (Airtran Holdings) to a Buy.

This simply means that I am still standing by my belief that AAI at a $5 handle is a great investment.... but that Oil prices spiking are never a "good" and "wonderful" thing to happen to a debt laden, struggling airline company.

Normally I'd lower a stock like this to a SELL but I happen to be contrarian to the analysts out there predicting $85 Oil in July.  I believe Oil starts pulling back and going down just as it did last year at about 2nd week of July.  Therefore, the rally in Oil should be looking a lot weaker in a few weeks.

2 Comments – Post Your Own

#1) On June 10, 2009 at 4:09 PM, MikeBobulinski (< 20) wrote:

What might the impact be to your assessment of the recent BLOG posted by TMFSinchiruna regarding the Russian intent to sell US Treasuries to buy IMF Bonds and that impact on the dollar (which should push the dollar down) and thus causing a spike in oil?

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#2) On June 10, 2009 at 4:44 PM, Varchild2008 (85.34) wrote:

I'd be more concerned about irrational federal government behavior by way of TAX HIKES to try and bail itself out of its budget deficit, combined with CAP and TRADE, Univ. Health Care, and so many other problems further down the road...

Companys will take immediate hits by the falling dollar if their currency is mostly in dollars.  But, that can be offset by the boost in their exports.

Take a Beverage Company for example.. If its internatonal then they will take a hit to their bottom line from increased commodity prices and transportation prices..... But, companys can make up SOME of the loss if not all of it through the benefit of being able to make a bigger profit off of their beverages being sold in foreign nations with foreign currency that is gaining in value over the Dollar.

As the Dollar Drops... Other currencies gain value.... International buisiness has mastered the ability to protect itself from the falling dollar... 

The problem is that the average american consumer does not have the capability and means to take their cash and start converting it to the *correct* *better* currency and there by end up with more money to spend rather than less.

In short...  CONSUMER spending does take a hit from falling dollar....  But only local consumer spending.... Foreign Consumer Spending will SPIKE and make up some if not all of this short fall by buying our exported goods.   A rise in FORD (I own 215 shares) vehicles has shown up in CHINA for example.

CHINA is still in a deflationary economy...5 months straight...
Their currency is going UP while ours is going DOWN making those companys that sell in CHINA have a bright long term future despite the volatility in consumer spending here.

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